Circular economy and technology

Source: Tim Heffernan, here

This is the third post regarding circular economy. In my first one (see here) I argued that before discussing the details we have to deal with the concept of circular economy and I put some conceptual questions. In my second one (see here) I discussed circular economy and economic growth and my conclusion was that circular economy can’t resolve (or it can only partially resolve) the conflict between environmental impacts and economic activity, even if it is 100% adopted worldwide because there are planetary, natural limits to growth. I finished this post writing that “Circular economy approaches are helpful and useful, but they are limited (and at the same time stimulated) by limits to growth.”

In this third post, I will deal with the relation between circular economy and technology development, or to put it in another way to study the dynamics between technology development and resource management.

We all know that any naturally or physically growing system can be understood in terms of stocks, flows and feedback. Stocks are accumulations of things that change over time through the interaction between inflows and outflows. Feedback occurs when changes in the size or composition of a stock affect the rates of inflows and/or outflows (feedback maybe positive or negative). As it has been proven, in a bounded natural environment, the balance between inflows and outflows is determined by different principles for renewable and non-renewable resources (for more see G. Turner “A comparison of The Limits to Growth with 30 years of reality”, Global Environmental Change 18 (2008) 397– 411 here).

Consider non-renewable resources like oil, rare metals, phosphorus etc. I think that if we use the example of oil, we can better understand the role of technology from a systemic point of view, exactly as it has been discussed by Donella Meadows at her masterpiece “Thinking in Systems – a Primer” (for more see here). 

So, when a new oilfield is exploited, part of the profits gained is invested in establishing new additional oil wells, something that results to additional oil extraction. This leads to more profits and extra investment in oil wells. This is a typical positive (or reinforcing) feedback and the economics work in such a way that the easiest (and less costly) oil resources are firstly depleted. In any case, there is a time where extraction will become more difficult and costly, so the expected benefits will be lower than the costs involved for oilfield exploitation and this will reduce the investments in new oil wells. This is a typical negative feedback or a balancing one. But this will also make oil scarcer, so its prices will rise and so more money will be available for investments in difficult and costly oilfields. This description outlines how different types of feedback determine the system’s behavior for short or long periods. Studying the history of oil exploitation certainly demonstrates the political, social and economic importance of those feedbacks (for more on this topic I strongly suggest Sonia Shah’s book “Crude: The story of oil”, see here). 

Source: New York Tines here

Nonetheless, what is the final result? As Meadows has shown and Sonia Shah demonstrated a. the potential lifetime of a newly discovered oil field (under the initial conditions and scale of operations) is substantially reduced as a result of the system dynamics b. oil companies invest for new fields in some of the most impoverished and unstable areas of the world and c. new technological advances (e.g. deep water drilling) are making new, very difficult and costly oil fields available but with substantial environmental and health risks.

In this point, I think it is useful to mention one of the key-conclusions made by the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling in its report "Deep Water: The Gulf Oil Spill and the Future of Offshore Drilling," Report to the President, January 2011 (for a summary see here).

“Scientific understanding of environmental conditions in sensitive environments in deep Gulf waters, along the region’s coastal habitats, and in areas proposed for more drilling, such as the Arctic, is inadequate. The same is true of the human and natural impacts of oil spills.”

It does seem to me that the concept of natural limits to growth is here again and technology can’t overcome it, no matter how advanced it will be. And the reason for that is that as our technologies become ever more advanced and complex, they try to resolve problems in much more complex and less understood conditions. The consequence of this exponentially increasing complexity is that “complex systems fail in complex ways”, which are not predictable!

From a resource point of view, further more advanced and efficient technologies make new oil fields available (e.g. fracking and its impact in US economy). So this provides more oil and maybe it expands the time where oil will be available, with a certain environmental cost (for details see here). Nevertheless, the big picture is that those technological advances are making the depletion of oil resources faster!

Source: here

It is not so difficult to prove that the role of technological advances is similar to renewable resources too; the main difference is that renewable resources like fish population are controlled by the balance between inflows and outflows and not but stock availability (scientifically we say that they are flow limited, while non-renewable are stock limited).

I believe the example of oil highlights the role of technology from a resource point of view. Technology developments can’t overcome limits to growth and at the same time they accelerate the process of depletion of non-renewable resources because stocks are finally limited, despite the temporal system dynamics and pricing. And certainly, as technology complexity grows, environmental and health risks are becoming more and more difficult to be managed.

The term “throughput” is frequently used to describe the flow of energy and matter from ecological resources through the economy and back to ecological sinks. At this point, I will use the phrasing from the article “A systems and thermodynamics perspective on technology in the circular economy” (written by Ramelt & Chrisp, available at Real World Economics Review, issue 68, see here).

“For industrial systems, a low throughput of matter and energy implies a smaller ecological footprint and greater life expectancy and durability of goods and infrastructure; a high throughput implies more depletion of resources that will need to be renewed and more waste that will need to be disposed of (Meadows and Wright 2008). System dynamics and thermodynamics tell us that a tolerable rate of throughput and entropic transformation is ultimately dictated by the natural system, not by economics or engineering.

A possible task for engineering, within limits, would be to maximise the durability of stocks by minimising inflows of low entropy natural resources and by minimising outflows of high entropy waste and emissions. The role that industrial societies have assigned to technology is, however, much more Herculean. We have asked it to simultaneously and boundlessly minimise environmental impacts and maximise economic growth.”.

The direct consequence of this analysis is that as long as we maintain high throughput, as long as we keep high material and energy consumption patterns (as nations, industries and citizens too) we can’t expect technology to manage the existing biophysical limits of the planet, independently of how circular we will make the economy. And the waste generation will keep growing because waste is the product of a high throughput and technologies can only accelerate its generation. 

Circular economy and growth

What is the definition of circular economy? We discuss a lot about it, but I am afraid that not all of us have the same definition. It is difficult to find an exact definition, but I feel that combining the following two we can have a good idea.

According to the Ellen Macarthur foundation, the circular economy aims for a “transformation of products and their associated material flows such that they form a supportive relationship with ecological systems and future economic growth”.

In Wikipedia we get some more details “The circular economy is a generic term for an industrial economy that is, by design or intention, restorative and in which material flows are of two types, biological nutrients, designed to reenter the biosphere safely, and technical nutrients, which are designed to circulate at high quality without entering the biosphere.”

So allow me to say two issues. At first, circular economy aims to create a supportive relationship between ecological systems and economic growth. At second, the concept is built on two material flows, the biological and the technical ones. This post will address the first of those two points. The discussion regarding the biological and technical nutrients will follow.

I would state that the concept of circular economy is one more effort to bridge the widening gap between the predominant production and consumption patterns of our world, especially the developed one, and the continuously restricting limits posed by resource availability and environmental quality. In this view, circular economy has many common points with concepts like natural capitalism, industrial ecology and cradle-to-cradle. All of those concepts are based on a more or less same, old principle: with the right technology development and innovation, our world can achieve continuous economic growth without substantial or irreversible environmental impacts.

What is rather new in the circular economy approach is the emphasis given to suitable business models and social interfaces and not just to technology development and application. In this way, circular economy is one step forward because it represents a more systemic approach than cradle-to-cradle and natural capitalism.

There are two elementary and conceptual questions to be raised. My problem is that when we discuss about circular economy we consider the answers to those questions as given, which is not the case, as I will attempt to explain. Here are the two questions.

Question 1: is our earth capable to sustain a continuous economic growth (for all the population and not just for 20% of it) or there are planetary limits to growth, which must be respected?

Question 2: what is the role of technology development in relation with economic growth and environmental impacts? More specifically, what are the expected results by technology development that leads to more efficient industrial production and improved resource utilization, even with less environmental impacts (although this is not always the case, as we all know)?

Let’s start with question 1, which I will call briefly “limits to growth”. I think that we have already a lot of evidence that there are very important global limits to growth. Let me quote some of them.

Declining oil reserves and Peak Oil concept offers a lot to understand the planetary growth limits (for more here ). As Fatih Birol, Chief Economist EIA, put it in 2008 “We have to leave oil before it leaves us”.

Several important metals are in a depletion phase (e.g. gallium and indium) while others are going to be depleted soon (e.g. zinc and platinum between 2020-2030) – for more here  . Especially the scarcity of rare metals is seriously hindering the green and the electronics industry (for more see the report “Rare Earth Metals Scarcity: A 'Ticking Time Bomb' for the World?” here .

Industrialized fishing has already reached its global limits and we have passed to the declining phase of specific fishes’ populations. Fish stocks across the world are declining faster than feared, with the smallest fisheries faring worst. Doing nothing will result in an almost complete depletion of salt water fishes around 2050, as it was documented by Boris Worm at his emblematic work “Impacts of Biodiversity Loss on Ocean Ecosystem Services”, (Science, Nov. 3, 2006; vol. 314: pp 787-790 here).

Of course, there is a certain CO2 limit. Oceans and terrestrial ecosystems absorbed roughly 315 of a total 555 gigatonnes of accumulated anthropogenic carbon emissions in the period 1750-2011. And while CO2 emissions continue to grow, the absorbing capacity of carbon reservoirs is limited and will probably tail off (see the excellent paper “Increase in observed net carbon dioxide uptake by land and oceans during the past 50 years”, Nature 488, 70–72 (02 August 2012) doi:10.1038/nature11299 here).

In 2009, the Stockholm Resilience Centre published a report on Planetary Boundaries. According to the estimates of an international group of scientists, five of the nine crucial boundaries have already been overstepped, namely climate change, loss of biodiversity, ocean acidification, chemical dispersion and nitrogen cycle (for more here ).

I can write much more examples of undeniable, specific limits to growth. However, the conclusion remains the same. There are definite limits to economic growth; specific planetary natural barriers limit the economic expansion.

The logical consequence is that since there are limits to growth, any efforts for a “supportive relationship” between ecosystems and economic growth are certainly restricted by the limits to growth. Or in another phrasing, circular economy can’t resolve (or it can only partially resolve) the conflict between environmental impacts and economic activity, even if it is 100% adopted worldwide.

Despite this limitation, the adoption of circular economy policy approaches (which has become mainstream as we all know) is certainly helpful and environmentally useful. After all, waste prevention, reuse, recycle and recovery activities are more and more crucial for certain materials just because the limits to growth exist!

So let me summarize my first conclusion. Circular economy approaches are advantageous and useful, but they are limited (and at the same time stimulated) by limits to growth. Let’s see what are the consequences of technology development at the next post.